Competition Commission wants dedicated supermarkets ombudsman

A dedicated ombudsman with tough new powers to protect farmers and suppliers from exploitation by supermarkets has been proposed by the Competition Commission.

After a two-year inquiry into the £123bn grocery market, the watchdog wants an ombudsman to police contracts between grocers and their suppliers. The new body will have the power to "proactively investigate" breaches of a new code of practice which will govern how supermarkets do business with their suppliers.

Supermarkets may also have to appoint in-house compliance officers to ensure they comply with the code.

The Comp Comm report is its third full-scale inquiry into the supermarket sector in the past eight years and comes amid mounting concerns over the increasing dominance of Tesco, Asda, Sainsbury's and Morrisons. Tesco has nearly one third of the UK grocery market and the big four together control three-quarters of the market.

Other changes proposed by the watchdog include a new "competition test" which local planning authorities will have to consider before giving the go-ahead to new store developments. The move is intended to make it easier for rival stores to set up in towns dominated by a single grocery chain.

The Competition Commission had identified 200 locations where more competition was needed. It stated that a lack of competition in such markets "not only disadvantages consumers in those areas but also allows retailers to weaken their offer to consumers nationally".

The commission is also taking action on "restrictive covenants", which grocers attach to land they buy and sell to prevent rivals using it to build stores. The watchdog said such covenants must be released and will be banned in future.

The watchdog was also concerned about the abillity of grocers to pass on "excessive risk and uncertain costs" to their suppliers by backdating contract changes.

It received 550 submissions and held 75 hearings and has a dataset of 14,000 grocery stores.